Asia report: Japanese stocks lead losses on stronger yen, yields

(Sharecast News) - Asian stocks experienced yet more volatility on Friday with markets mirroring losses on Wall Street as sentiment continues to be dominated by newsflow on trade tariffs; while Japanese shares bore the brunt of the sell-off.

On Thursday, Donald Trump delayed his proposed 25% tariffs on goods imported from Mexico and Canada that comply with the USMCA trade agreement. According to reports, that accounts for roughly half of Mexico's exports to the US, and 37% of Canada's. The suspension will run until 2 April.

"The idea that you can repeatedly turn tariffs off and on without damaging economic activity has clearly run out of support, and businesses are likely to react by postponing investment until we have greater tariff clarity," said Joshua Mahony, chief market analyst at Scope Markets.

The Nikkei 225 dropped 2.2% to its lowest since mid-September, while the SSE index fell 0.3%, the Hang Seng lost 0.6% and the ASX 200 tumbled 1.8%.

Stocks in Japan fell sharply on the back of a stronger yen - which often weighs on export-reliant stocks - as investors increase their expectations for rate hikes by the Bank of Japan amid inflation concerns. Meanwhile, 10-year Japanese government bond (JGB) yields jumped 9 basis points to 1.54%, their highest level since 2009.

Adding to price pressures was the news that the Rengo trade union was pushing for a 6.09% wage increase in 2025, the biggest one-year hike since 1993.

"This could be the definitive sign that Japan's deeply entrenched deflationary mindset is breaking, keeping the BoJ locked into its rate normalisation path," said Stephen Innes, managing partner at SPI Asset Management.

Japanese automakers Honda and Toyota were weaker as the yen strengthened, along with retail giant Fast Retailing.

Meanwhile, video game outfit Nintendo dropped 9% - the most in seven months - on fears that US tariffs would lead to price hikes for consoles, with the company relying heavily on manufacturers in China to make its products.